Sunday, 4 July 2010

Just pay your taxes, Fabio

I think the Football Association are right to give Fabio Capello more time as manager of the national football team, despite England's worst-ever performance at a World Cup finals. Sometimes a change of leader can distract from addressing deeper problems and causes.

But there should be a rapid rethink of one rather ill-conceived and ill-timed part of the plan, according to the report in Saturday's Times, where Matt Hughes wrote:

The strength of his [Capello's] position is shown by the FA's willingness to enlist tax specialists to look at ways of maximising his £5 million salary, which has depreciated in real terms since his appointment as a result of the falling pound against the euro.

Capello raised the issue during the talks that led to the removal of the escape clause in his contract last month, although the FA avoided giving him a compensatory pay rise.

Hmmm.

There are several reasons why that seems rather unfortunate.

(1) Capello lives in London, not Rome.

Might Mr Murdoch not cavil at that use of "real terms" in his newspaper. What is meant is that Capello's salary would translate into less purchasing power in Italy and the eurozone. Since the manager lives in London, the relative value of sterling does not affect his standard of living more than that of England's Premiership-based players, or indeed the rest of us, even if it could give the manager less to put into European investments or pension plans.

(2) Capello was easily top of the World Cup pay league.

One must wonder at the strategic insight which sees the FA apparently congratulating itself and briefing its wisdom, foresight and restraint in somehow avoiding a further "compensatory pay rise" to a manager it employs at a salary in a league of its own in international football.

Capello is paid £5 million a year (or £115,000 a week). You could get 33 British Prime Ministers for that. More pertinently, the World Cup managers' pay league table, put together by Argentinian paper Olé, shows that the FA pay Capello more than twice as much as any other World Cup coach.

Capello's salary is triple what Germany's Joachim Low earns, and more than thirty times what Uruguay pay Oscar Tabarez. As their sides now prepare for World Cup semi-finals, Capello's England did cement their claim to be in the world's top sixteen before heading home.

(3) The timing is not ideal, either in footballing terms or more broadly.

England did not do very much in South Africa to take the country's mind off the budget deficit. The least that the manager could do is to pay his own fair share in taxes towards it.

Of course, Fabio Capello is as or more deeply disappointed by England's World Cup performance as anybody. The manager will no doubt be deeply hurt by the knowledge that his world-beating salary curently represents rewards for footballing failure.

That will surely spur him to win the nation's confidence and to prove that his excellent record at club level has given him the world-class management skills to lead English football to change course. That is what Capello must now prove: he has his second chance to do so.

Of course, nobody has seriously proposed to renegotiate his contract and salary to reflect England's worst-ever World Cup finals performance. How difficult could it be to notice that this is surely an inappropriate moment for the FA or the manager to be focusing on how he can be more fully renumerated for his efforts, particularly by short-changing the national Treasury.

(4) The FA takes money from the public purse and so should not encourage its most prominent employee from avoiding contributing to it.

The Football Association receives £25 million a year in Sports England funding for grassroots football. That is among a range of other direct and indirect ways in which public resources help to support or underwrite the sport. Those in receipt of funds from the public purse should be particularly reticient about seeking to avoid making their contribution to the common pot, or helping (Yes, that applies in spades to prominent BBC voices employing creative tax avoidance measures with the corporation's support, something which the BBC Trust should stamp out).

If Capello wished to use his own resources to privately pursue legal methods to minimise his tax bill, it may be difficult to do anything to prevent that. But the FA should not be resourcing or organising that. As a national institution which professes a public ethos founded on fair play, the FA should refuse if tax planning requires its participation in elaborate but legal dodges for tax purposes.

For example, England wish to employ Fabio Capello as a manager. They should not be willing to subcontract that out to 'Fabio Capello Football Management Services PLC' or some similar ruse conceived and designed for tax purposes, paying him in art or other commodities, or perhaps exploring whether the manager can live in London (as he does) and yet have non-dom or similar status, something which the FA would surely understand would lack public legitimacy.

(5) Neither the FA nor the manager should be blind to the reputational risks involved.

Both Capello and the FA were confident the manager had nothing to worry about from an Italian investigation into his tax affairs. It was later reported that the investigation had been concluded and would not lead to any charges against Capello, though the manager confirmed Italian reports that a sum of 5 million euros had been paid in taxes owed relating to one company.

There are reputational risks in even legal avoidance by the FA and national team manager too, and I suggest that the FA should anticipate facing further questions about these arrangements.

If The Times report overstated the issue, a statement saying that the England manager is proud to be here as manager of the national team, is naturally domiciled in the UK given that he lives in London, and that the FA does not intend to engage in highly creative employment practices designed to help their highest profile employee avoid paying taxes, could clear it up quickly.

***

While the FA has confirmed Capello's contract until after Euro 2012, the strategy must now reject tournament to tournament thinking, and stretch beyond the four-year World Cup cycle too.

Watch out for some straw-clutching English football revisionism about the 2010 World Cup campaign following Germany's 4-0 rout of Argentina. After all, didn't England lose only 4-1 (and 4-2 really!). I hope Messi, Tevez and the rest of Maradona's team were spared German taunts asking "are you England in disguise?"

But there is an important lesson for England in Germany's success. Every England fan - with the curious exception of David Miliband writing in this week's New Statesman - knows that there is next to no chance of returning from Brazil in 2014 with the World Cup. We simply do not have the nucleus of a team capable of competing to win the World Cup, even before you consider the location.

Trevor Brooking has suggested real hope lies with England's current under-17 European Champions, and that it will take five years before they are challenging for places in the senior squad. Their chances of them making an impact in 2018 could well be greater if we seek to emulate both Germany and Ghana in consciously promoting the best of those younger players more quickly to the national side. (England had only one player under 24 in its 2010 squad, while the average age of the German squad was 24.7, as they fast-tracked their under-21 champions. France similarly used Euro 96 to consciously develop a new generation, after failing to qualify for the 1994 World Cup).

England should aim to qualify for and perform creditably in Euro 2012 and the 2014 World Cup, where a quarter-final place would emulate our best ever performance in South America. The strategy should be to build the squad experience, playing style and broader set-up that maximises the national team's chances for Euro 2016 and the 2018 World Cup, the next to be played in Europe (and perhaps in England). There are risks in gambling heavily on youth but England has little to lose. Sticking to that strategy through the qualification rounds for 2012 and 2014 may depend on the FA making it clear from the outset to the public and media that the decision to target the 2018 tournament is a conscious one.